Updates for market open, changes dateline to CHICAGO from PARIS/SINGAPORE

By Heather Schlitz

CHICAGO, May 6 (Reuters) - Chicago grains tumbled on Wednesday, giving up recent gains, as a decline in crude oil prices caused a flurry of long liquidation by managed commodity funds that had recently taken massive long positions on grains.

Oil prices fell sharply to two-week lows on Wednesday as optimism grew about a possible end to the war in the Middle East, with reports the United States and Iran were nearing an initial peace deal. O/R

A source from mediator Pakistan said the United States and Iran were closing in on an agreement on a one-page memorandum of understanding.

The most-active soybean contract on the Chicago Board of Trade Sv1 was last down 18-3/4 cents to $11.93 per bushel as of 12 p.m. CT (1800 GMT). Corn Cv1 lost 10-1/4 cents to $4.69-3/4 a bushel and wheat Wv1 gave up 10-1/2 cents a bushel.

"They're looking at the headlines like 'Crap is this war going to be over? Get me out'," said Jason Ward, managing director of Northstar Commodity. "It's a get-me-out mentality. I don't think it has much to do with weather or planting progress. It's just the headlines."

Conflict-driven fluctuations in oil prices have strongly influenced grain markets, as corn and soybean oil are widely used as feedstocks for biofuel production.

Wheat followed crude oil lower as well, though a drought in the U.S. wheat belts remained as a floor for prices.

Rain is forecast to hit some dry U.S. wheat zones this week, although traders said precipitation may come too late to save the crop in some areas.

The U.S. Department of Agriculture's weekly report said 31% of the nation's winter wheat crop was in good to excellent condition, up from 30% last week but still the lowest for this time of the year since 2023.

A group of Oklahoma crop experts on Tuesday projected Oklahoma's 2026 winter wheat harvest at 47.799 million bushels, with an average yield of 23.11 bushels per acre, following an annual tour of the state, said Mike Schulte, executive director of the Oklahoma Wheat Commission.

The estimates were sharply lower than the 10-year yield average of 94.499 million bushels in Oklahoma, among the top U.S. wheat-producing states.